Engaging Distributors for Conflict Minerals Due Diligence ... · • Distributors account for a...

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Engaging Distributors for Conflict Minerals Due Diligence Information

Good Practice Guide

Version 1 April 2017

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Table of Contents i. About the Responsible Minerals Initiative ............................................................................... 3

ii. Acronyms ............................................................................................................................... 4

iii. Limitations ............................................................................................................................. 4

iv. Executive Summary............................................................................................................... 5

Key Findings .......................................................................................................................... 5

For Companies ...................................................................................................................... 5

For Distributors ...................................................................................................................... 6

I. Introduction ............................................................................................................................. 7

a. Background ....................................................................................................................... 7

b. Purpose ............................................................................................................................. 7

c. Methodology ...................................................................................................................... 7

II. Significance of Distributors in the Supply Chain .................................................................... 8

III. Challenges in Gathering Information from Distributors .......................................................... 9

IV. Distributor Information/Successes ....................................................................................... 10

a. Company Good Practices ............................................................................................... 10

b. Distributor Good Practices .............................................................................................. 11

V. Conclusions ......................................................................................................................... 12

Appendix: Survey Questions and Results ............................................................................ 14

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i. About the Responsible Minerals Initiative The Responsible Minerals Initiative (RMI), formerly the Conflict-Free Sourcing Initiative (CFSI), was founded in 2008 by leading electronics companies to help them make informed choices about 3TG conflict-free sourcing in their supply chains. The CFSI equips companies with tools and resources that improve regulatory compliance and support responsible sourcing from conflict-affected and high-risk areas. More than 360 companies and associations from seven different industries are part of the RMI today, and the initiative collaborates with other relevant programs focused on responsible sourcing.1 Examples of the RMI’s tools and resources include white papers and best practices guidelines on tin, tantalum, tungsten and gold (3TG) sourcing and reporting, a 3TG reporting template that helps downstream companies gather necessary information, and a voluntary, independent third-party audit program for smelters and refiners (SORs), called the Conflict-Free Smelter Program (CFSP), that identifies countries of origin for mineral sourcing and helps companies achieve responsible sourcing of 3TG.2,3 The CFSP protocols were developed by the RMI with multi-stakeholder input to be consistent with the Organisation for Economic Co-operation and Development (OECD)'s Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High Risk Areas (CAHRAs) (OECD Guidance)4. The CFSP is not a certification program and participation is voluntary. Companies that source from SORs that have been found to be CFSP-compliant are not considered automatically in compliance with the United States Securities and Exchange Commission (SEC) Final Rule.5 However, by sourcing from CFSP-compliant SORs, companies can go a long way toward meeting SEC requirements.

1 www.responsiblemineralsinitiative.org 2 In 2012, RMI (then CFSI), the London Bullion Market Association (LBMA), and the Responsible Jewellery Council (RJC) announced mutual cross-recognition of independent, third party gold refiner audits, in order to reduce duplication for refiners, to support their efforts in implementing the OECD Due Diligence Guidance and complying with the responsible sourcing legislation. 3 The conflict-free smelter list is available at http://www.responsiblemineralsinitiative.org/conflict-free-smelter-refiner-lists/ 4 Full text available at: http://www.oecd.org/fr/daf/inv/mne/mining.htm 5 Full text available at: http://www.sec.gov/rules/final/2012/34-67716.pdf

http://www.responsiblemineralsinitiative.org/

http://www.responsiblemineralsinitiative.org/conflict-free-smelter-refiner-lists/

http://www.oecd.org/fr/daf/inv/mne/mining.htm

http://www.sec.gov/rules/final/2012/34-67716.pdf

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ii. Acronyms

3TG Tantalum, tin, tungsten and gold

CAHRA Conflict-Affected and High-Risk Areas

CFSI Conflict-Free Sourcing Initiative

CFSP Conflict-Free Smelter Program

CMRT Conflict Minerals Reporting Template

ECIA Electronic Components Industry Association

EU European Union

LBMA London Bullion Market Association

OECD Organisation for Economic Co-operation and Development

RJC Responsible Jewellery Council

RMI Responsible Minerals Initiative

SEC United States Securities and Exchange Commission

SORs Smelters or refiners

iii. Limitations This guide is intended to improve understanding of the challenges around collecting conflict minerals data from distributors. It explains the role that distributors play in the supply chain, elaborates on the challenges faced by downstream companies when collecting conflict minerals data from their distributors, gives examples of good practices for both companies and distributors, and provides recommendations on how to improve data collection. By sharing these practices, the RMI hopes more companies will adopt similar practices, thus making responsible sourcing more efficient and ultimately more effective at mitigating conflict and other serious human rights abuses. This guide in no way constrains other practices that may be employed to responsibly source 3TG in the supply chain. Downstream companies may choose to use the tools and information provided by the RMI in conjunction with the due diligence framework set out in the OECD Guidance to help them meet legislative requirements such as those listed in the United States Securities and Exchange Commission Final Rule on compliance with the Dodd-Frank Act (SEC Final Rule).6 Both the OECD Guidance and the SEC Final Rule recognize that a company’s processes must be tailored to the facts and circumstances of the individual enterprise, taking into account size, complexity and supply chain characteristics. Thus, each downstream company must make its own judgment whether, based on its circumstances, conformance to this or any other set of practices satisfies its obligations under the SEC requirements or as a responsible corporate citizen. This guide is intended to provide general industry guidance and information as it relates to distributor practices and conflict mineral data collection. No part of this document constitutes legal advice, and the choice to use any part of this document is voluntary and made at the user’s sole discretion.

6 Full text available at: http://www.sec.gov/rules/final/2012/34-67716.pdf

http://www.sec.gov/rules/final/2012/34-67716.pdf

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iv. Executive Summary Understanding the origin of materials in their supply chain and undertaking due diligence is a key component of a company’s compliance with the U.S. legislative requirements and conformance to the OECD Guidance. Companies utilize the tools developed by the RMI, such as the Conflict Minerals Reporting Template (CMRT) and the CFSP, to identify risks in their supply chains by collecting SOR data from their suppliers, assessing that information and undertaking appropriate risk management. One of the many challenges companies face when conducting due diligence is the willingness and/or ability of suppliers to provide necessary supply chain information. This is especially true when the supplier is a distributor, often because distributors are not the original manufacturer of products, or simply do not have the information. This guide provides background on the significance of distributors in the supply chain, the challenges companies face collecting data from distributors, and identifies some good practices companies or distributors can implement to assist in the collection of supply chain data that supports company due diligence and disclosure. To develop this guide we surveyed RMI members, analyzed survey findings and conducted supplemental research including interviews with distributors and distributor associations.

Key Findings

• Distributors account for a significant proportion of companies’ supply chains and thus the parts received from distributors constitute a significant amount of data that needs to be collected.

• Most distributors do not think it is their responsibility to provide supply chain data. This leads companies to approach manufacturers directly for data rather than terminating business relationships with distributors.

• Companies and distributors have identified several good practices to improve supply chain data collection and sharing, including:

For Companies

Proactive Management

• Engage distributors directly through in-person meetings and phone calls rather than by email.

• Allocate longer lead times for distributors to respond to data requests.

• Require conflict minerals data for only newly purchased products.

• Increase priority of obtaining distributor responses by escalating to senior procurement staff.

• Use a third party to conduct regular and timely follow-up with distributors.

• Consider terminating business relationships if information is not provided.

• Include language in data surveys to remind distributors of their responsibilities to provide conflict minerals data and request manufacturer contact details in case this is not possible.

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• Provide a list of product codes for each reporting year so distributors can match them to relevant manufacturers, creating a more efficient process.

• Request the distributor to obtain agreements with manufacturers regarding conflict minerals data.

Distributor Capacity-Building

• Educate distributors about conflict minerals and supply chain due diligence and build their capacity to collect, analyze and provide data (e.g., via specialized webinars, access to RMI resources, online learning tools).

Stakeholder Collaboration

• Create collaborations among companies, manufacturers and distributors.

• Work with distributors to gather information from manufactures as the distributor spend will help influence manufacturers to provide data.

• Work with distributor associations to help facilitate data transfer from their members.

For Distributors


• Post a list of manufacturers on their website with a copy of the most recently received CMRT from that manufacturer.

• Provide the manufacturer contact information so the manufacturer can be contacted directly.

Incentivize Manufactures

• Create a yearly supplier excellence award where manufacturers have points associated with whether the supplier is able and willing to provide a CMRT.

• Require manufacturers to have a policy that supports development and provision of CMRT data to customers upon request as part of their sales channel.


• Work with customers to collect information from manufacturers.

• Distributor Associations can work with the RMI to build awareness among their members and develop strategies and processes that facilitate the transfer of conflict minerals data.

In short, there are several practices a company or distributor may implement to improve communication and sharing of supply chain data. There are many opportunities to improve the process of obtaining data for parts purchased through distributors. This can be accomplished through collaborative activities within an individual organization’s supply chain or through collaboration with various industry organizations working together to improve awareness and systems associated with conflict minerals and data collection.

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I. Introduction

a. Background The SEC’s Conflict Mineral Rule requires U.S.-based publicly traded companies to file annual reports regarding the sources of tin, tantalum, tungsten and gold (3TG) found in their products. Based on the OECD Guidance, most companies are collecting smelter and refiner data from their first-tier suppliers to help them meet their reporting obligations. Not only do companies source directly from parts manufacturers, but many companies source parts indirectly from distributors. Distributors account for a significant proportion of downstream companies’ supply chains, and are therefore an important source of conflict minerals data. Nevertheless, collecting data from distributors has long been a difficult task for many companies when conducting their supply chain due diligence. One of the biggest obstacles appears to lie in determining responsibility for data collection – research indicates that more than 80 percent of distributors believe it is not their responsibility to collect conflict minerals data. Moving past the accountability issue, distributors themselves are not regulated by the SEC Final Rule (unless they also manufacture or are contracted to manufacture products) and manage a large number of product parts for which many of their customers are requesting conflict minerals information. Thus, many companies have struggled to get the necessary information for parts they source from distributors, limiting the information needed to make a reasonable determination regarding the SORs in their supply chain as defined by the SEC Final Rule.

b. Purpose

The purpose of this guide is to provide information and a list of good practices for companies to consider when collecting conflict minerals information for parts purchased through distributors. This information is needed by companies to help meet their SEC reporting requirements. The guide also provides information on how a distributor can better manage its customers’ requests. The RMI embarked on a mission to understand the significance and relevance of distributors in the supply chain and the challenges that exist around collecting conflict minerals data for the parts they provide. This guide will outline the challenges and provide strategies and good practices a company can use to improve its data collection. By having more complete data, companies will be able to better meet their reporting obligations and make more informed decisions in their efforts to mitigate risks associated with the materials in their products that may support conflict and serious human rights abuses. As a result, the RMI created this good practices guide for companies to collect conflict minerals information for parts purchased through distributors more efficient and ultimately help them become more effective at mitigating conflict and other serious human rights abuses.

c. Methodology

The methodology for developing this good practice guide consisted of the following steps: Step 1: RMI Member Survey –To inform the content of the guide, the RMI launched a member survey in January 2017 with questions designed to help understand distributors' roles and

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significance in the mineral supply chain as well as challenges faced by companies in collecting information from distributors. The survey also provided the opportunity for companies to share good practices that have been successful in getting data from distributors. The majority of the data compiled was collected via the survey directed to the approximately 360 RMI member companies, of which responses were received from 65 companies. The general respondent breakdown was as follows:

• 80 percent of survey respondents were based in the United States and 12 percent were based in the European Union (EU).

• Buyers from non-U.S. North America and Asia accounted for less than a tenth of the respondents, while no data was received from countries from other regions.

• Regarding company size, nearly a third reported annual sales of at least $10 billion, with 85 percent reporting at least $1 billion in annual sales, 57 percent reporting annual sales of $1billion-$10 billion and 15 percent reporting annual sales of more than $25 billion. (Survey questions and results provided in the Appendix)

Step 2: Analysis of Survey Findings – The survey results were collected and analyzed to determine the roll distributors play in the supply chain, the challenges around collecting conflict minerals data, and to identify a list of potential good practices. Any uncertainties regarding the data collected were corrected by contacting responding companies. Data was then presented to RMI members for consideration and feedback. Step 3: Follow-Up Research – Based on the survey data, a list of follow-up questions was developed for companies that had a high rate (larger than 50 percent) of distributors that provided data and/or had listed a good practice. Distributors that were identified by multiple survey respondents or were identified as providing conflict minerals data also were contacted to better understand their challenges and how they deal with customer requests. Follow-up research consisted of communications via direct interviews or through email. To supplement the survey data collected, distributor and distributor association websites were examined to analyze the conflict mineral statements provided. In cases where clarification or further distributor information was beneficial, the distributors and the associations were contacted directly. Step 4: Preparation of Guide – Based on the survey data, follow-up research and RMI member feedback on the guide was developed and reviewed by the RMI’s Due Diligence Practices Team, to solicit input and comments. Once the comments were addressed the document was finalized. It is hoped that the good practices derived from the compiled data will allow companies to get more complete conflict mineral data from their distributors and produce more effective collaboration.

II. Significance of Distributors in the Supply Chain The research found that most survey respondents (88 percent) are trying to collect smelter information from their distributors, with 43 percent of them requesting data from more than 20 distributors. Additionally, 5 percent are collecting from 11-20 distributors, 28 percent are collecting from 6-10 distributors and 12 percent from 1-5 distributors. Interestingly, 82 percent of respondents are collecting some smelter information from their distributors, however, 69 percent of respondents are collecting from less than 50 percent of their distributor base, while 47

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percent are collecting less than 25 percent of their distributor base. This indicates a significant data gap for parts acquired from distributors. To help understand the complexity of the process, the number of unique parts per distributor was collected. As a result, the research revealed that more than two-thirds (69 percent) of the surveyed buyers are purchasing at least 100 unique parts from their distributors. Furthermore, 42 percent of companies are purchasing more than 1,000 unique parts. This helps to explain the volume of parts provided by distributors and the reason distributors claimed that complexity of managing multiple parts was listed as a challenge in collecting data by more than 50 percent of respondents (to be addressed in section IV). To further shed light on the distributor relevance, we looked at the direct material spend and types of materials respondents reported. We found that purchasing from distributors accounts for a significant portion of the respondents' direct material spends – between 5-25 percent for more than half of the respondents and 20 percent of respondents reported more than 25 percent of their spend. Based on the responses received, distributors account for a significant proportion of companies’ supply chains, including the number of distributors, the number of parts received and the amount of spend. Thus, parts received from distributors constituted a significant amount of conflict minerals data that needs be collected.

III. Challenges in Gathering Information from Distributors As previously mentioned, the process of collecting conflict mineral sourcing information from distributors is challenging. While more than two-thirds of buyers contractually require their distributors to provide conflict minerals data, either through the CMRT or other declaration documents, buyers still are faced with the issue of distributors thinking it is not their responsibility to collect or provide the data – more than 80 percent of respondents reported that their distributors think it is not their responsibility. This position is supported by the Electronic Components Industry Association (ECIA), which provides the following guidance to its distributor members: “ECIA member distributors will provide customers with links to manufacturer websites to obtain Conflict Minerals information directly or will pass through EICC GeSI template information as provided by electronic component manufacturers.”7 According to an electronics distributor association, a typical distributor carries approximately 16,000 products making data collection a difficult task. Due to the large number of products handled by distributors, they believe it would be more efficient for companies to go directly to the manufacturer for conflict minerals data. This further emphasizes the point that distributors do not think it is their responsibility to provide conflict minerals data to their customers. Distributors believe customers also need to be more cognizant of the challenges they face with collecting conflict minerals data. They have voiced frustration by saying, "It is difficult for us to collect data from reluctant manufacturers, especially when capital spend with the manufacturer is small." Because the research indicates that more than 80 percent of respondents purchase off-the-shelf electronics from distributors while 60 percent purchase custom electronics, and given the ECIA

7 ECIA Conflict Minerals statement can be found @ https://www.ecianow.org/wp-content/uploads/Conflict-Minerals-Statement-FINAL-update-9-2014.pdf

https://www.ecianow.org/wp-content/uploads/Conflict-Minerals-Statement-FINAL-update-9-2014.pdf

https://www.ecianow.org/wp-content/uploads/Conflict-Minerals-Statement-FINAL-update-9-2014.pdf

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guidance, the magnitude of the challenge of getting data from electronic component distributors is exemplified. As a result, of the 51 percent of respondents that collect data from their distributors, most put continuous pressure on their distributors for information while also contacting product manufacturers directly. Methods for data collection include: reviewing manufacturers websites for information (36.5 percent), contacting manufacturers directly to get information (57.7 percent), and continuing to pressure distributors to provide data (75 percent). Additionally, when pressure methods proved unsuccessful, 9.6 percent of respondents discontinued purchasing from the distributor altogether. One respondent noted they found that the EU-based distributors and suppliers are the most difficult to obtain conflict minerals information from given that it is considered a requirement for U.S. companies but not EU distributors. If a company does receive data from a distributor, the company must understand if the distributor-provided data contains SOR data only for the parts received or a company-level report covering all the parts and materials sold by the distributor. One respondent stated, “We have received a few consolidated CMRTs from a distributor but it was considered meaningless because it covered everything they sold. I think it had over 400 smelters. We purchased only a few parts so we obtained the data from the manufacturer.” As stated earlier, most distributors don’t think it is their responsibility to provide conflict minerals data. This and other challenges make companies approach manufacturers directly for data rather than terminating business relationships with distributors. One respondent, a U.S.-based component manufacturer, sells an equal number of products to distributors as it does to direct customers and yet only 8 percent of its CMRT requests are coming from distributors. According to the manufacturer, this is because “many buyers are bypassing the distributor and going directly to the manufacturer.” This emphasizes a lack of collaboration between distributors and buyers.

IV. Distributor Information/Successes

a. Company Good Practices

Even with these challenges, many buyers have identified successful techniques to obtain conflict minerals data from distributors. Survey respondents included the following good practice methods for data collection, which are grouped into the categories of proactive management, distributor capacity-building and stakeholder collaboration:

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• Engage distributors directly through in-person meetings and phone calls rather than by email.

• Allocate longer lead times for distributors to respond to data requests.

• Require conflict minerals data for only newly purchased products.

• Increase priority of obtaining distributor responses by escalating to senior procurement staff.

• Use a third party to conduct regular and timely follow-up with distributors.

• Consider terminating business relationships if information is not provided.

• Include language in data surveys to remind distributors of their responsibilities to provide conflict minerals data and request manufacturer contact details in case this is not possible.

• Provide a list of product codes for each reporting year so distributors can match them to relevant manufacturers, creating a more efficient process.

• Ask the distributor to obtain agreements with manufacturers regarding conflict minerals data.

Distributor Capacity-Building

• Educate distributors about conflict minerals and supply chain due diligence and build their capacity to collect, analyze and provide data (e.g., via specialized webinars, access to RMI resources, online learning tools).


• Create collaborations among companies, manufacturers and distributors.

• Work with distributors to gather information from manufactures as the distributor spend will help influence manufacturers to provide data.

• Work with distributor associations to help facilitate data transfer from their members. While individual items may work independently, a combination of the above strategies seems to increase data collection. One supplier with a 92 percent overall response rate said its most successful approach was sending the distributor an explanation letter plus education material on conflict minerals and the CMRT. The material included the statement made in its policy – "non-cooperative suppliers will be removed from our supply chain. This company only accepts the CMRT." The educational material was a short presentation and can be found on the RMI website. There was no additional business incentive other that letting the distributors know that non-compliant suppliers will be removed from the respondent's supply chain. The respondent also joined efforts with one of its major customers to help “push” distributors. The respondent stated, “After all, we are part of the same supply chain, and collaboration works well.”

b. Distributor Good Practices Based on follow-up discussion with distributors and distributor associations, there are several good practices distributors can implement. One distributor stated, "Customers appreciate when we are able to provide CMRT’s so we try to help them out as best we can by gathering data and forwarding it down the supply chain." One distributor industry association representative believes that most distributors are willing to help pressure manufacturers to give data and that

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the number of reluctant manufacturers is shrinking as the industry gets further along in the process. Several distributor representatives raised concern that when distributors post a manufacturer's CMRTs on their websites, they may not be the most up-to-date versions because the updated versions can be missed. As such, some manufacturers don’t want distributors to post CMRTs because they want to ensure the downstream buyers are getting the most recent CMRT.


• Post a list of manufacturers on their website with a copy of the most recently received CMRT from that manufacturer.

• Provide the manufacturer contact information so the manufacturer can be contacted directly.

Incentivize Manufactures

• Create a yearly supplier excellence award where manufacturers have points associated with whether the supplier is able and willing to provide a CMRT.

• Require manufacturers to have a policy that supports development and provision of CMRT data to customers upon request as part of their sales channel.


• Work with customers to collect information from manufacturers.

• Distributor associations can work with the RMI to build awareness among their members and develop strategies and processes that facilitate the transfer of conflict minerals data.

V. Conclusions Although distributors are an important step in buyers’ supply chains, most distributors think that it is not their responsibility to provide conflict minerals data. As companies face this and other challenges in obtaining conflict minerals data, they are experimenting with several good practices, combining elements of proactive management, distributor capacity-building and stakeholder collaboration. In summary: Distributors account for a significant proportion of companies’ supply chains and thus the parts received from distributors constituted a significant amount of conflict minerals data that needs to be collected.

• Distributors account for around 5-25 percent of companies’ direct material spend.

• Many companies are purchasing more than 1,000 unique parts, adding to the complexity of data collection.

• Companies most commonly purchase off-the-shelf electronics, custom electronics and mechanical parts from distributors.

• Most companies are collecting conflict minerals information from their distributors (half of them from more than 20 distributors).

Most distributors do not think it is their responsibility to provide conflict minerals data. This and other challenges make companies approach manufacturers directly for data rather than terminating business relationships with distributors.

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• More than two-thirds of companies contractually require their distributors to provide data, either through the CMRT or other declarations.

• 52 percent of companies collect material content data from their distributors.

• Distributors do not think it is their responsibility to provide conflict minerals data, and instead point buyers directly to manufacturers.

• Rather than terminating business relationships with distributors, companies prefer to approach product manufacturers for data.

Companies are using several practices to improve conflict minerals data collection from their distributors, ranging from longer lead times to capacity-building. There were a number of good practices identified for companies collecting the information from distributors and distributors themselves. As the conflict minerals process matures, data is coming more readily available and the majority of organizations are utilizing the RMI’s CMRT to communicate the necessary data. With that said, there continues to be many opportunities to improve the process of obtaining data for parts purchased through distributors. This can be through collaborative activities within an individual organization’s supply chain or through collaboration with various industry organizations working together to improve awareness and systems associated with conflict minerals and data collection. The RMI is encouraged by the large number of respondents acknowledging the importance of collecting conflict mineral data from distributors. Through this guide, we hope to have provided an insightful look at what leading companies are doing to drive change in the industry, making responsible sourcing more efficient and ultimately more effective at mitigating conflict and other serious human rights abuses. Acknowledging the inherent challenges with such data collection, and implementing the good practices laid out by these example companies, buyers around the world can do their part in helping mitigate conflict and adverse human rights impacts linked to mineral sourcing. Acknowledgements This guide was made possible by the generous participation of Montana Tech of the University of Montana. Special thanks to Brett Jonson, Senior Environmental Engineering student who led the collection of survey data, research and follow-up interview process; and Dr. Kumar Ganesan, Head of the Environmental Engineering Department.

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Appendix: Survey Questions and Results

7 Analysis of Survey Findings Copyright © 2017 Responsible Trade, LLC. All rights reserved.

Where Are Your Company Headquarters? Reflec ngthecurrentCFSImemberbase,avastmajorityofthesurveyedbuyersareheadquarteredintheUnitedStates.

• 80%ofrespondentsarebasedintheUnitedStates

• 12%ofthebuyersareheadquarteredintheEuropeanUnion

• BuyersfromNorthAmerica(non-U.S.)andAsiaaccountforlessthanatenthoftherespondents

• Nofeedbackwasreceivedfromcompaniesfromotherregions(Africa,Australia,Europe/non-EUandSouthAmerica)

3%

12.3%

4.6%

80%

n = 65

Asia Europe (EU member)

North America (non-U.S.) U.S.

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What Are Your Company’s Annual Sales? Thesurveyedbuyersmakesignificantrevenuesasnearlyathirdofthemhaveannualsalesofatleast$10billion.

• 85%oftherespondentsmakeatleast$1billioninannualrevenues

• 57%ofcompanieshaveannualsalesof$1-$10billion

• Buyerswithannualsalesofmorethan$25billionaccountforaboutaseventhofthebuyers(15%)

1.7%

5%

8.3%

56.7%

13.3%

15%

n = 60

Less than $100 million $100-$500 million

$500-$999 million $1-$10 billion

$10-$25 billion More than $25 billion


How Does Your Company Collect Supplier Data? Mostbuyersrelyoninternalresourcestocollectsupplierdataandveryfewareusingthirdpar esforthispurpose.

• Morethanafi hoftherespondentsareusingadatacollec onapproachthatdrawsuponbothinternalandexternalresources

• 69%ofcompanieshaveaninternalteam/personcollec ngdata

• 7%ofbuyersareonlyusingathirdparty

69.1%

7.4%

23.5%

n = 68

Internal team/person

External third party

Combination of internal and external

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How Many Distributors Do You Collect Smelter Informa on From? Mostoftherespondingbuyersarecollec ngsmelterinforma onfromatleastsomeoftheirdistributors,withnearlyhalfofthemreques ngdatafrommorethan20distributors.

• 12%oftherespondentsarenotcollec ngsmelterinforma onfromtheirdistributors

• Morethanaquarterofcompanies(28%)arereachingoutto6-10distributors

• Nearlyahalf(43%)ofbuyersaregatheringinforma onfrommorethan20distributors

12%

12%

28%

5%

43%

n = 58

None 1 to 5 6 to 10 11 to 20 More than 20


What Percentage of Distributors Do You Collect Smelter Informa on From? Mostrespondentsarecollec ngsomesmelterinforma onfromtheirdistributors,however69%ofthemarecollec ngfromlessthan50%oftheirdistributorbase.

• Nearlyafi h(18%)ofbuyersdonotgatheranysmelterinforma onfromtheirdistributors

• Asimilarpercentage(29%)ofcompaniesarecollec ngdatafrom1-10%oftheirdistributors

• 15%ofbuyerscollectfrom26-50%oftheirdistributorbase

• 31%ofbuyersarecollec nginforma onfrommorethan50%oftheirdistributors

18%

29%

7%

15%

31%

n = 55

None 1-10% 11-25% 26-50% More than 50%

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How Many Unique Parts Does Your Company Purchase From Distributors? Morethantwothirdsofthesurveyedbuyersarepurchasingatleast100uniquepartsfromtheirdistributors.Furthermore,42%ofcompaniesarepurchasingmorethan1,000uniqueparts.

• Justunderathird(27%)ofcompaniesarepurchasingbetween101-1,000uniquepartsfromtheirdistributors

• 42%ofbuyersarepurchasingmorethan1,000uniqueparts 12%

6%

13%

26%

42%

n = 52

0-10 11-50 51-100 101-1000 More than 1000


What % of Direct Material Spend is Allocated to Purchasing From Distributors? Purchasingfromdistributorsaccountsforasignifica ntpor onoftherespondingcompanies’directmaterialspend–between5-25%foroverahalfoftherespondents.

• 18%ofcompaniesarealloca ng5-10%oftheirdirectmaterialspendtopurchasingfromdistributors

• Afi hofthebuyers20%arealloca ngmorethan25%oftheirspend

27%

20%

18%

15%

20%

n = 40

Less than 1% 1-5% 5-10% 10-25% More than 25%

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What Reasons Do Distributors Give for Not Providing Informa on? Alargemajorityofdistributorsbelievethatitisnottheirresponsibilitytoprovideconflictmineralsdataandthatcustomersshouldrequestinforma ondirectlyfrommanufacturers.

• Morethan80%ofdistributorsthinkthatitisnottheirresponsibility

• Morethantwothirdsrefertothelackofregulatoryrequirementsonthem

• Morethanahalfofthedistributorsstatethattherearetwomanyproductpartstomanageforthiskindofdata

• Nearlyafourth(23%)thinkthatitwillcostmoretoprovideinforma on

00%

10%

20%

30%

40%

50%

60%

70%

80%

90%

It is not their

responsibility.

Customers

need to check

with the

manufacturer

of the product.

It will cost

more.

There are too

many parts for

them to

manage this

type of data.

They are not

required to as

they are not a

SEC issuer.

Other

n = 46

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What Have You Done When Distributors Have Not Provided Data? Mostoftherespondingbuyersputcon nuouspressureontheirdistributorsforinforma onwhilealsocontac ngproductmanufacturersdirectly.

• Avastmajorityofbuyersarepu ngpressureontheirdistributorsonacon nuousbasistoobtaindata

• Nearly60%choosetoapproachtheproductmanufacturerdirectly

• 10%ofcompanieshaverespondedthattheywoulddiscon nuetheirbusinessrela onship

00%

10%

20%

30%

40%

50%

60%

70%

80%

Nothing Reviewed manufacturer's

website for

information

Contacted manufacturer(s)

directly to get

information

Continued to pressure

distributor to

provide data

Discontinued purchasing from

that distributor

Other

n = 50


Does Your Company Contractually Require Your Distributors to Provide Data? Morethantwothirdsofbuyerscontractuallyrequiretheirdistributorstoprovideconflictmineralsdata,eitherthroughtheCMRTorotherdeclara ondocument.

• 43%ofthesurveyedcompaniesareusingtheCRMTfordatacollec on

• 35%ofbuyershavenotimposedanycontractualobliga onsontheirdistributors

43%

4%

18%

35%

n = 51

Yes, CMRT

Yes, declaration documents other than CMRT

Both of the above

No

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Have You Ever Terminated a Distributor Rela onship for Not Providing Data? Veryfewbuyersaretermina ngrela onshipswiththeirdistributorsincasetheyfailtoconflictmineralsinforma on.

• 10%ofthesurveyedcompaniesaretermina ngrela onshipswiththeirdistributors

10%

90%

n = 50

Yes No


Do You Collect Material Content Data From Your Distributors? Thereisscopetoimprovethecollec onofsmelterdatafromdistributorsasslightlymorethanahalfofthesurveyedbuyersarecurrentlydoingsoformaterialcontentinforma on.

.• 51%ofbuyerscollectmaterialcontentdatafromtheirdistributors

51%

49%

n = 50

Yes No

Engaging Distributors for Conflict Minerals Due Diligence ... · • Distributors account for a...

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